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31 TBOKDS B805 18 B416 8221 802?  7511 7316 7122 Figure 19 Another short leg up and a short leg down gives me and the realization that this market is in a giant trading range between the initial large magnitude day that first brought prices to this level, to the present. I therefore draw a new envelope.
Trading By Tlie Book - Part 11  Figure 20 My next trade is to be long on the breakout of the envelope as shown. Three days later, I am back in a 1-2-3 low situation, so I add to my position on a buy stop, 1 tick above the #2 point.
9383 9138 9819 This can also be a t2 point -> 8908 8619 j)riii]a[beakoutJon2 ->  <-LoTig here 3 <- tuo stops nou here <-Long here protective stops uere here Figure 21 shows my next opportunity based on a 1-2-3 low. I want to be long on the breakout of the #2 point, with three stops 1 tick below the #3 point. Im filled and immediately get in trouble. Notice that the price bar before the #2 point aiso would have qualified as a #2 point, but ) didnt notice it at the time. A #2 and a #3 point can occur on the same day if the day is an outside day. Also, #1 and #2 points can occur on the same day and for the same reasons. Unless there are at least four bars in the entire formation, I tend to leave it alone and wait for something more definitive. Very often, a larger, overall 1-2-3 will occur which encompasses and includes the smaller 1-2-3. The point above labeled (2) is also a Ross hook. This concept will be covered later in the book.
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